The Fair Credit Reporting Act (FCRA)

This article will help you understand:

• The Fair Credit Reporting Act (FCRA) 
• Your Responsibilities as an End-User 
• Checkr's Responsibilities as a CRA

The Fair Credit Reporting Act (FCRA)

The FCRA is a federal law that governs how companies order, use, and consider consumer reports, which include what’s commonly referred to as background checks or credit checks.   

For the purposes of employment, the FCRA generally applies to consumer reports for both employees and independent contractors.

Enforcement of the FCRA is overseen by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). The law was enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies like Checkr. To that end, it provides safeguards and rights for the consumer (the candidate or employee that is the subject of the background report.

The Consumer Reporting Agency (CRA, such as Checkr) providing the consumer report and the company that ordered the report (the End-User) must adhere to certain safeguards that ensure consumers’ rights are protected.

Your Responsibilities as an End-User

As an end-user under the FCRA, your responsibilities and duties may vary depending on the purpose for which you obtain a consumer report, including but not limited to insurance underwriting, tenant screening, or employment-- i.e., the listed “permissible purposes” for obtaining a consumer report allowed by the FCRA. End-users have specific duties and obligations under the FCRA when they obtain a background check report for employment purposes (such as hiring or promoting job applicants, employees, or independent contractors). These duties include:

1. Obtain a consumer report(s) for an FCRA permissible purpose(s) (Permissible Purpose);
2. Provide notice to the consumer in writing that you intend to obtain a consumer report for employment purposes (Written Disclosure);
3.  Obtain the consumer's written consent to run a report (Authorization); 
4. Provide the consumer with a “pre-adverse action notice,” a summary of their rights under the FCRA, and a copy of their report if you intend to make an adverse decision (such as declining them for employment or promotions) based on the information in the report (Pre-Adverse Action);
5. Waiting Period: Give the consumer a reasonable waiting period to provide additional context or to dispute any inaccurate information contained in the  consumer report before making a final adverse decision (Waiting Period);
6. Notify the consumer in writing when an adverse action is taken (Final Adverse Action Notice);
7. Identify the CRA that provided the report so that the consumer can dispute inaccurate information in their report with the CRA.

As your partner in background check screening, Checkr helps facilitate your compliance with the FCRA by:

• Disclosure and Authorizations. If you are utilizing Checkr’s hosted-flow process, Checkr will provide the candidate with the summary of rights and your relevant federal, state, and/or local disclosure notice(s), and collect authorization from the candidate directly. Checkr streamlines your compliance processes by presenting these forms to the candidate as part of the consumer’s background check process. See our disclosure and authorization article for more information.
• Adverse Actions. You can use Checkr’s dashboard to make the adverse action process more efficient for your team. Specifically, you can ask Checkr to send a pre-adverse action notice (as required by the FCRA for employment screening) on your behalf to the candidate. Checkr will keep track of the waiting period for you. If the adverse action process is not canceled (for example, if you decide to cancel adverse action and move forward with the candidate after they submit additional context or evidence of rehabilitation), Checkr will automatically send the required post-adverse notice following the statutory waiting period. See our adverse action article for more information.

As a reminder, while Checkr helps facilitate your compliance processes, it’s important to consult your legal counsel to ensure that your compliance needs under federal, state and/or local law are met.

Checkr's Responsibilities as a CRA

As a consumer reporting agency (CRA), Checkr’s responsibilities are different from an end-user’s under the FCRA, including:

• Credentialing end-users to run background checks;
• Maintaining strict procedures to ensure the maximum possible accuracy of the information in reports or sending a contemporaneous notice to consumers when we report potentially adverse information in reports requested for employment purposes;
• Providing consumers with all information in their files upon request (also known as a Full File Disclosure);
• Re-investigating information on the report after candidates dispute the information within 30 days; and
• Not reporting obsolete information, such as non-convictions older than seven years.

Note again that these are different from your responsibilities as an end-user. For example, while CRAs are restricted on what can or cannot be reported in a background check (such as inaccurate or obsolete information), end-users are responsible for how the information is reviewed and what actions they can take.

Following the above procedures ensures that candidates are aware of their rights under the FCRA and are given the opportunity to address concerns about their background check.